I do these trades a lot. I’d say be prepared to hold through the next week or 2. I’ve seen them top the day of the addition but also a week or 2 later. Vanguard doesn’t buy all their weighting in one day, they also buy it before and after the add date so sometimes it chops higher a bit. Next week is the weakest week seasonally of the year so could also get a market dip to help out
I think best to short it tomorrow prior to the close (to avoid getting whipsawed, potentially) and holding for the next couple of weeks. Closing if you get stopped out.
Basically, funds tracking the smaller index (in which the stock is heavier weighted) sell more of the stock than the funds tracking the bigger index (in which it is a smaller fish) buy... There is data that suggests if a stock is a genuine addition to an index (eg new listing), the stock stays up it seems
I do these trades a lot. I’d say be prepared to hold through the next week or 2. I’ve seen them top the day of the addition but also a week or 2 later. Vanguard doesn’t buy all their weighting in one day, they also buy it before and after the add date so sometimes it chops higher a bit. Next week is the weakest week seasonally of the year so could also get a market dip to help out
Thanks, Andy. Appreciate the comments.
So short be the open. Any thoughts on timing of the short . I’ll take a look at options in the AM
I think best to short it tomorrow prior to the close (to avoid getting whipsawed, potentially) and holding for the next couple of weeks. Closing if you get stopped out.
Thx
Hi, while I don't short, I'd refer you to an alternative possible for the effect (instead of sell the news) you draw the attention to. I wrote about it in https://open.substack.com/pub/compcap/p/the-index-effect?utm_source=share&utm_medium=android&r=l1sdn
Basically, funds tracking the smaller index (in which the stock is heavier weighted) sell more of the stock than the funds tracking the bigger index (in which it is a smaller fish) buy... There is data that suggests if a stock is a genuine addition to an index (eg new listing), the stock stays up it seems